Controversy over dividend payments reached its peak this spring, during the annual meeting season. Faced with the scale of the Coronavirus crisis, listed companies had to preserve their resources whilst avoiding massive public aid to remunerate their shareholders. According to the latest global survey from global asset manager Janus Henderson, that's just what they did.
According to the Janus Henderson Global Dividend Index, dividends paid to shareholders in the second quarter of 2020 were down $108.1 billion compared to the same period in 2019. Shareholders "only" received $382.2 billion, down 22% from last year’s figures. "The spread of COVID-19, combined with the lockdown imposed by public authorities, has led companies to preserve their balance sheets and their cash flow", explained Jane Shoemake, Client Portfolio Manager at Janus Henderson. More than a quarter of the companies monitored reduced, suspended, or cut payments.
Almost all regions of the world are affected by this movement, due to the epidemic’s late arrival on their territories. Europe particularly stands out. Dividends fell by 45% on the continent, with more than half of European companies reducing payments. Among this figure, two-thirds have simply suspended dividend payments altogether. In France, payments declined by as much as 57%, with eight out of ten companies decreasing their payments.
Strong pressure from government
The reason for the downward decline in payments is probably due to the strong pressure from governments on companies to conserve their cash. Bruno Le Maire, the French Minister of the Economy and Finance, called for moderation in the payment of dividends very early on. Bercy, The French Ministry of the Economy and Finance, also made corporate state aid and the postponement of tax and social contributions conditional on the non-payment of dividends. The consequence for not abiding by this rule is the repayment of state aid and other penalties.
Among the sectors most affected, finance is at the top with a reduction of $54 billion in global dividends payments. Distribution, tourism and leisure companies, which have been particularly affected by lockdown measures, also had to seriously decrease payments. By contrast, telecommunications, healthcare and tech companies continued to pay large dividends. For example, during Sanofi’s general meeting in France, they voted for €4 billion in dividends payments for 2020, which is a slight increase compared to 2019.
2020 should remain the year with the largest drop in dividends since the 2008 financial crisis. Over the full year, the decrease in shareholder payments is expected between 17% and 23%. The total amount collected by shareholders should, however, exceed $1 trillion.
Arnaud Dumas, @ADumas5